Autos, airlines boost Europe

Adidas soars on quarterly results, Salomon sale

By

AudeLagorce

LONDON (MarketWatch) -- European markets advanced on Monday, helped by airline stocks that benefited from oil prices below $50 a barrel and a star performance from Adidas-Salomon AG.

Germany's DAX 30 index rose 0.9% to 4.224, while France's CAC 40 Index (1804546) gained 0.7% to 3,938. Markets in London were closed for a national holiday, which kept a lid on volumes across Europe. Volumes for Deutsche Bank (804010)
DB, +1.05%
for example, were less than half of its average.

The euro edged 0.09% lower vs. the dollar at $1.2865, while the pound fell a more significant 0.72% to $1.8951, albeit in a thinly traded market.

In economics, Eurozone April manufacturing PMI fell to 49.2 in April from 50.3 in March, with German April manufacturing PMI missing forecasts, French manufacturing PMI slowing to a 19-month low and also below expectations, and Italian manufacturing PMI falling to 48.0 in April from 49.1 in March. A reading below 50 indicates contraction.

Investors were still positioning themselves against sluggish economic growth.

A trader at Banque Privee Fideuram Wargny said the banking sector was also doing quite well because at present valuation, it's quite defensive. French banks BNP Paribas SA (013110) and Societe Generale (013080) each rose 1.6%.

Oil-sensitive stocks such as tire maker Michelin SA (012126) and airline Lufthansa (823212) led the way, though front-month crude oil contracts edged higher in early New York trade.

Extra support came for Michelin and other French auto stocks came as the French CCFA trade association said auto sales rose 11.4% in April to 233,939 vehicles.

Adidas-Salomon (500340) was a standout, up more than 8% in Frankfurt after a strong first-quarter and after agreeing to sell Salomon.

The German sneaker and apparel maker said 2005 net income should be at the high end of its 10%-15% growth view and it upped its operating margin target to 10%.

Adidas added later in the day that it's selling its Salomon ski-making unit to Amer Sport Corp. for 485 million euros. Amer Sports shares were up over 7% in Helsinki.

"The sale wasn't something we expected but it's good news for Adidas as Salomon has been struggling with weak demand for winter sports goods in the past few years," said Gavin Finlayson, an analyst with Commerzbank.

Finlayson added that Salomon seemed to be getting a very good price and that Amer probably feels it can achieve significant synergies with its Atomic brand business.

In the telecom sector, Versatel Telecom International N.V. (39126) climbed 24% in Dutch trade, as the group confirmed it was in talks with Belgacom (000381027), and the De Tijd newspaper said Dutch telecom operator Scarlet also is looking at buying the company. De Tijd on Friday broke the news that Belgacom was interested in Versatel. Belgacom eased 0.9% in Brussels.

Analysts for Fortis said a note to clients that they don't rule out other companies wanting to acquire Versatel.

ABN said it wanted to challenge the vote after what it has said was unfair treatment in Italy. Antonveneta shares rose 0.4%.

Siemens AG (723610)
SI, +0.00%
rose 0.3%. The Sunday Business newspaper said the German government is blocking its attempts to sell its loss-making mobile phone-making unit due to job loss concerns.

In the construction sector, shares of Holcim (001221405) were flat after the Swiss cement and materials company said first-quarter net income soared 67.3% to SFr 169 million ($141.3 million) while sales slipped 1.1% on currency fluctuations. Holcim also reiterated its guidance for 2005, saying weather-related and seasonal losses sustained in the first quarter should be offset over the remainder of the year.

Analysts for Morgan Stanley said the sales and EBIT results came in below expectations, "due to poor weather in Europe, a weaker dollar and strong increases in energy and transport costs."

Shares of Edison SpA (315241) rose 0.9% in Milan after a report in French newspaper La Tribune said state-owned Electricite de France is mulling an exit from Italy. The report said EDF might exit the market after learning from Italian market regulator Consob that a buy-out of Edison could cost it much more than originally forecast.

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